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Correspondent

21 August 2024 at 10:20:16 am

Fee Signal

The government’s decision to create a legal framework for levying charges on UPI transactions has understandably triggered concern, even though it insists that ordinary users and small merchants will continue to enjoy free payments. The proposed amendment does not impose a fee on UPI today. But it removes the statutory barrier to one being imposed in the future, making the government’s reassurance less than the final word. The government argues that this is a measure for UPI’s long-term...

Fee Signal

The government’s decision to create a legal framework for levying charges on UPI transactions has understandably triggered concern, even though it insists that ordinary users and small merchants will continue to enjoy free payments. The proposed amendment does not impose a fee on UPI today. But it removes the statutory barrier to one being imposed in the future, making the government’s reassurance less than the final word. The government argues that this is a measure for UPI’s long-term sustainability. The world’s largest real-time payments system, which processed 2,366 crore transactions worth Rs. 29.9 lakh crore in July alone, cannot indefinitely depend on subsidies as transaction volumes, cybersecurity requirements and infrastructure costs rise. A nominal Merchant Discount Rate on larger merchant transactions, it says, would help create a more sustainable ecosystem without burdening ordinary users. That argument has merit. But so does the concern that a payment system which became a national habit precisely because it was cheap and frictionless should not slowly acquire a price tag. Once the legal machinery for charging exists, there is no guarantee that the boundary between large merchants and small ones, or between merchants and consumers, will remain permanently fixed. The Finance Minister has clarified that any Merchant Discount Rate will apply only to a limited set of merchant transactions above a threshold and will be nominal, well below card-payment rates. The details will eventually be decided by the UPI and Services Steering Committee headed by the National Payments Corporation of India. In other words, there is no charge on the table for the ordinary UPI user today. But there is now a legal mechanism for charges to be introduced tomorrow. That is precisely why any alarm, though exaggerated, cannot simply be dismissed. The government, through its clarification, has reassured that UPI’s free-to-consumer model remains intact. The important issue is whether its financing model can evolve without undermining the habits that made it revolutionary. UPI succeeded partly because it made digital payments cheaper and simpler than alternatives. There is also a larger principle at stake. UPI is not merely another commercial payments platform. It is the product of public investment, regulatory architecture and private innovation. The state should therefore be wary of treating its sustainability as an ordinary market problem. The sensible answer lies between free-for-all subsidies and indiscriminate fees: transparent thresholds, genuinely low MDRs, strong protection for small merchants and an absolute firewall around ordinary consumers. The government should publish the economic case for any future charge, including its effect on merchants and consumers. UPI was built on trust as much as technology. The government is right to protect its remarkable achievement. It should remember that keeping UPI free is not merely a political promise. It is part of the product.

Phantom Promises

The unravelling of the Mukhyamantri Majhi Ladki Bahin Yojana was always a matter of when, not if. Announced with theatrical flourish ahead of the 2024 Assembly election by the ruling Mahayuti coalition, the scheme promised Rs. 1,500 a month to women across the state. It became the Mahayuti government’s showpiece welfare programme and, by all accounts, a decisive political instrument that helped propel the ruling alliance to a comfortable victory. Less than two years later, the curtain has now fallen. Nearly 92 lakh beneficiaries – a whopping 38 percent of those initially enrolled – are now being shown the door as the scheme becomes economically untenable.


If such a staggering proportion of beneficiaries never qualified in the first place, what exactly was the government doing when it rolled out the scheme with such urgency? The scheme is a classic case of welfare as a cold election strategy rather than a governance policy.


The scheme’s benefits flowed generously just before the election. The scrutiny that has now arrived has exposed it for what it was: a fiscal white elephant. The Comptroller and Auditor General has now compounded the Mahayuti’s embarrassment with its report, which questions expenditure of more than Rs. 3,541 crore under the scheme. Such spending places an unsustainable burden on Maharashtra’s finances. The CAG’s report is an indictment of a style of governance that treats the public exchequer as an extension of the campaign war chest.


Across India, governments of every political persuasion have perfected the art of competitive populism. Cash transfers, freebies and subsidies are unveiled with increasing frequency, often without credible fiscal planning or robust verification mechanisms. Welfare has become less about empowering citizens than about cultivating dependable vote banks.


Schemes designed primarily for electoral dividends inevitably collapse under their own contradictions, leaving beneficiaries disillusioned and public finances weakened.


The greatest injustice is borne not by politicians but by ordinary citizens. Honest taxpayers finance these extravagant promises. Genuine beneficiaries build their household budgets around them. When governments later discover that millions were ‘ineligible,’ it is ordinary families, and not the politicians or their families, who suffer the consequences.


If money has indeed been squandered because of political haste, accountability cannot stop with bureaucrats or clerks processing applications. Those who conceived, announced and relentlessly campaigned on the scheme must also bear responsibility. The leaders of the three ruling Mahayuti partners – the BJP, the NCP and the Shiv Sena - who converted public money into political capital should be prepared to answer financially as well as politically.


Democracy cannot become an auction where elections are won with taxpayers’ wallets. It is time to end the politics of fiscal bribery masquerading as welfare. Maharashtra deserves governments that create opportunity, not dependency, and policies that survive beyond polling day.

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